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Bitcoin leader: Regulation should protect consumers

Government regulators have some role to play overseeing the virtual currency bitcoin, a top developer said on Thursday, but they should be sure not to crack down too harshly.

Gavin Andresen, chief scientist at the Bitcoin Foundation and one of the core developers behind the money, said that consumer protection was one way that governments could perform useful oversight.

“For me personally, I think things like consumer protection make sense,” he said at an event at the Council on Foreign Relations. “You should have some idea of who you’re interacting with if you’re trusting them with money or whatever. So you know, things like that make a lot of sense.”

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Efforts to “control” the money, however, might work for “a government like North Korea” but might not be as successful in democratic countries.

Bitcoins only exist virtually but can be exchanged for cash or used to buy goods and services at some stores.

Advocates say that the money is easier to transmit than government-backed currency. The quantity is also fixed – though bitcoins are still being created, there will never be more than 21 million in the world. That can make the money seem like a commodity, which is attractive to some.

Regulators have raised concerns that bitcoins could be used to launder money, which has prompted congressional hearings and government inquiries into whether new regulations should be issued. Andresen hoped that any new rules would not impede bitcoin's innovation.

“I think regulators tend to focus on costs and risks and not to focus so much on benefits,” he said.

The Treasury Department has set rules for bitcoin exchangers, but the government has otherwise taken a relatively hands-off approach.

Advocates may not convince all governments of the currency’s potential, Andresen said, “but so far, at least here in the U.S., it feels like we’ve been successful in that message, that we really do think that the benefits of bitcoin are going to make the world a better place.”